MARC Ratings has affirmed TSH Sukuk Murabahah Sdn Bhd’s RM150 million Medium-Term Notes Programme rating at AA-_IS with a stable outlook. The outstanding stood at RM90 million as at end-March 2023. TSH Sukuk Murabahah is the funding vehicle for TSH Resources Berhad (TSH) which has provided an irrevocable and unconditional undertaking to meet the purchase obligations of its subsidiary.

The rating affirmation is driven by TSH’s strong cash flow generation on the back of higher fresh fruit bunches (FFB) output and stronger average crude palm oil (CPO) price during 2022 that have led to a strong balance sheet. The average CPO price rose to RM4,100/MT (2021: RM3,570/MT). The rating is mainly moderated by the group’s susceptibility to commodity price movements and exposure to cross-border risk as a sizeable proportion of its plantation is in Kalimantan.

Its total planted area, which stood at 39,071 ha as at end-2022, comprises a healthy tree maturity profile, that will support FFB production and FFB yield. These rose to 923,990 MT and 24.5 MT/ha in 2022 (2021: 918,986 MT; 22.7 MT/ha). MARC Ratings notes that the FFB yield remains strong relative to that of many of its peers.

In 2022, group revenue rose by 9.8% y-o-y to RM1.3 billion; however, profit before tax was higher at RM557.3 million (2021: RM254.1 million), mainly contributed by gains on asset disposals of RM395.3 million. This relates to the sale of oil palm estates of 3,007 ha and a mill in Sabah as well as 7,817 ha of land parcels in Kalimantan. The proceeds were utilised to reduce group borrowings to RM559.1 million from RM1.1 billion, translating to an improved gross debt-to-equity (DE) ratio and net DE ratio of 0.26x and 0.08x (2021: 0.61x; 0.45x). Cash and bank balances of RM382.0 million as at end-2022 are sufficient to meet the final repayment of RM90 million under the rated programme due on June 16, 2023. 

Fatin Sadiqah Saberam, +603-2717 2934/ fatin@marc.com.my 

Yazmin Abdul Aziz, +603-2717 2948/ yazmin@marc.com.my